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Development of early warning index in Korean shipping industry by using signal approach

Author

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  • Jung-Suk Choi
  • Kang-Hyuk Kim
  • Hee-Jung Han

Abstract

The study aims to investigate and prevent shipping companies’ insolvency that can be derived from depressed market sentiment in the shipping industry. For this purpose, the paper focuses on developing an early warning index. The main factors that contribute to the change in the shipping industry are derived. Sixty independent variables were accounted in the development of early warning index, some of which are shipping, shipbuilding, and finance. Suggestions drew from the result of early warning index are described as below. Firstly, the results of a signal approach towards independent variables showed lowest the signal error value in newbuilding price of containership, bunker price, Commodity Research Bureau (CRB) commodity index, and order book of bulkship. These indicators have proven to be a high level of variation factor during shipping markets’ crisis. Secondly, the early warning index confirmed that it preceded by 6 months compared to probability of default. Thirdly, in order to validate the accuracy of the early warning index, the adequacy of the model was tested using a mean square error and time lag correlations. As a result of the verification, value proved to be at a high level of compliance at 0.097.

Suggested Citation

  • Jung-Suk Choi & Kang-Hyuk Kim & Hee-Jung Han, 2018. "Development of early warning index in Korean shipping industry by using signal approach," Maritime Policy & Management, Taylor & Francis Journals, vol. 45(8), pages 1007-1020, November.
    • Handle: RePEc:taf:marpmg:v:45:y:2018:i:8:p:1007-1020
    DOI: 10.1080/03088839.2018.1467058
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    Cited by:

    1. Mingzhu Yu & Ruina Yang & Zelong Yi & Xuwen Cong, 2020. "Contracting in Ocean Shipping Market Under Asymmetric Information," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 37(02), pages 1-24, March.
    2. Su-Han Woo & Min-Su Kwon & Kum Fai Yuen, 2021. "Financial determinants of credit risk in the logistics and shipping industries," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 23(2), pages 268-290, June.

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